You find a zero coupon bond with a par value of $15,000 and 20 years to...
You find a zero coupon bond with a par value of $15,000 and 20 years to maturity. If the yield to maturity on this bond is 5.8 percent, what is the dollar price of the bond? Assume semiannual compounding periods.
Homework Answers
Price of a zero coupon bond is equal to the discounted value of its face value
Semi-annual required return = 5.8%/2 = 2.9%
Number of semi-annual periods = 20*2 = 40
Dollar price of bond = 15,000*PVF(2.9%, 40 years)
= 15,000*0.3187
= $4,780.5
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